Public Bill Committee

[Mr. Martin Caton in the Chair]

Clause 18

Exclusion or expulsion from trade union for membership of political party

Jonathan Djanogly: I beg to move amendment No. 17, in page 17, line 41, at end add
(4) In section 177 (interpretation and other supplementary provisions) after subsection (2) there is inserted
(2A) For the purposes of section 174 an individual will only be considered to be a member of a political party if within the 12 months prior to the date of an individuals application for membership of the trade union that individual was registered with the political party as a member..

Martin Caton: With this it will be convenient to discuss amendment No. 18, in page 17, line 41, at end add
(4) In section 177 (interpretation and other supplementary provisions) after subsection (2) there is inserted
(2A) For the purposes of section 174 a group will be considered to be a political party only where it has been registered with the Electoral Commission under the Political Parties, Elections and Referendums Act 2000 (c. 41) or any foreign equivalent, and at the time of the individuals application for membership of the trade union the party remains on such a register..

Jonathan Djanogly: We are still on clause 18 and we are looking at ways in which more security can be put into the clause to protect the rights of employees. Amendment No. 17 aims to limit how far back into a members past a trade union is entitled to look to find reasons to exclude or expel. I accept that this is a question of balancing interests proportionately and in a common-sense fashion. However, the views and opinions that we hold in our youth are often bred of some degree of naivety and optimism for the world and those who inhabit it. Likewise, youthful ideals may have made some of us intolerant of others, but with time, some people change. Their views change and actions are adapted.
For instance, we must all accept that membership of the Campaign for Nuclear Disarmament as a student in the 1960s should not automatically enable a 50-year-old to be expelled from a trade union that represents workers in the nuclear industry. Without great caution, it seems that this could be extended further. What happens if an over-zealous parent had a teenage child signed up to an extreme party membership? Should the beliefs of the parent be used to punish the son? Of course not.
This provision seems at odds with a persons human rights. The amendment seeks to address the wrong by saying that the party membership must have been within the last 12 months. My hon. Friend the Member for Northampton, South made a powerful case, albeit slightly earlier than he was meant to, as to how unacceptable it would be for his party membership some years ago to be taken into account now. He may wish to come back and finish his remarks.
Amendment No. 18 goes to the definition of a political party. I have previously stated how we view this clause as an attack on civil liberties in many ways, but that we recognise the need to address the issue by virtue of the European convention on human rights. As things stand there is no definition of a political party in the Bill, so we need to ask at what point a persons political views constitute membership of a political party. If someone votes for the Socialist Workers party, or strongly or openly espouses some of its views, but is not a member of that party, could that person be banned from union membership? This is why we see the key issue as being conduct, not party membership. This whole area could be a recipe for disaster.
Furthermore, to all hon. Members who are worried about the British National party todayI agree that we all need to be worriedI say that they are missing the wood for the trees. We should keep in mind that the right hon. Member for Holborn and St. Pancras (Frank Dobson) supported the original legislation here in order to protect communists and their fellow travellers from being hounded out of unions. The hon. Member for Broxtowe made the same point in relation to a German union.
We can talk about countering the BNP but we should not think that this legislation is necessarily the format to use. Many other organisations could be caught in the net. Given the position we find ourselves in, we need to regulate carefully who will be caught in the definition of political party. That is why we suggest that we limit the expulsion right to members of political parties that are registered. When a similar amendment was moved in another place, the Minister noted that the employee may belong to a foreign party. The amendment now caters for that eventuality.
Perhaps the amendments drafting is not perfect, but I find it difficult to believe that the Government will be unable to draft an appropriate definition of a political party. When we come within the wide parameters of democracy, the spectrum of beliefs is very broad and the question is where we draw the line and who draws it. While exclusion for membership of the BNP may seem reasonable, at what point do we stop? Baroness Miller said:
Could, for example, a union involved with workers in the nuclear or coal-mining industry exclude a member of the Green Party?[Official Report, House of Lords, 7 January 2008; Vol. 697, c. 671.]
I fear that we may end up with trade union witch hunts in which hon. Members who show even the slightest diversion from a party line find themselves out on their ear. The Orwellian undertones are frighteningly apparent in their potential.
Secondly, once splits appear along political lines, how soon will it be before we see the internal fragmentation of trade union membership? What will stop those with differing political leanings from creating their own splinter groups? Increasingly, politics is an issue-driven playing field. The traditional affiliations of parties have been blurred and the electorate has become a more homogenised group as the parties head to the middle ground. That will present further problems should trade unions be able to bar membership on the basis of membership of the Countryside Alliance, Greenpeace or Amnesty International. How are we to categorise such groups? Are they political parties for the purposes of this Bill? As the fractures materialise, there could be further claims. We will then end up back here debating the same points after another slap on the wrist from Strasbourg. For those reasons, I am happy to move the amendment.

Nick Palmer: I want to raise a few points on the amendments. First, we have a briefing from Thompsons Solicitors, which acted for ASLEF in the court case that has given rise to this particular piece of legislation. It is critical of clause 18 as a whole, but its argument is slightly different from the ones mentioned so far. I will relate it to the amendment under discussion. Its concern is that even if a union could exclude members of the BNP, the party could change its name or have a slightly different variant every year to evade the exclusion. I am not sure how realistic that is because in practice, any serious political party would find it very difficult to change its name every year.
The same difficulty arises with amendment No. 18 in which the hon. Gentleman seeks to limit the exclusion to parties that are officially registered. However, the overtly neo-Nazi group Combat 18, which seeks to prepare for racial war, is not a registered political party. It stretches tolerance to the point of insanity if we say that we should force trade unions to associate with members of a group that is preparing for racial war. The issue is not really whether it is a political party as defined in the amendment, but whether we should enable trade unions to draw the line somewhere in a reasonable manner.
With regard to the hon. Gentlemans point about limiting the period of membership to 12 months, I have to declare an interest. I was a communist when I was young, although I was not a party member. I was quite open about it. I can imagine a situation in which that could be used against me professionallyoutside my current profession perhaps.
The provision about fairness is relevant. Proposed new subsection (4G)(b) requires that any decision be taken fairly. In my case, the involvement was 40 years ago. Reference was made to the possibility of the parents being involved. Any court would rule in practice that such an association had long lapsed and that it was not fair within the meaning of the common law to use it against the individual.
In todays society, trade unions are voluntary associations of people who come together for a common cause. It is open to anyone to form a separate trade union. The hon. Gentleman suggested that there was a danger that someone might do so under the Bill. Well, the BNP has already set up the trade union, Solidarity, for people who do not wish to be part of the TUC. It has a right to do that. As long as the party is legal, I do not have a problem with it setting up its own trade union. It is a reasonable solution to the problem.
As long as being a member of a particular trade union does not carry with it significant career and financial implicationsit does not under the Billit should be a matter of freedom of association to allow people to join unions whose objectives are similar to their own. It is reasonable to allow unions to exclude people whose objectives conflict directly with their own, in the same way that I might have difficulty were I to apply to join the Conservative party.

John Hemming: The principle in amendment No. 17, which is that only trade union membership in the immediate year before or during the membership period should matter, is reasonable. It is the drafting that is problematic. I understood the amendment to apply only to membership of a political party during the 12-month period prior to applying to be a member of a union, so if someone was a member of the union and then joined the party that would disqualify them, that would not count. I cannot back the drafting of the amendment, but its principle is good.
Amendment No. 18 is also good because that again refers to a form of conduct, but membership of a political party or standing for a party is a definable act. The Committee knows that I am sympathetic with the underlying principle of freedom of association. I have no problem with that. As the hon. Member for Broxtowe explained, people can take other routes if they do not like that one. The principle of amendment No. 17 is good, even if the wording needs to be sorted out. Amendment No. 18 is very good.

Natascha Engel: I am sure that some of my lawyerly friends will speak more about the matter, but an arbitrary 12-month period in which lawyers will have to prove that someone has been a member of a political party for 12 months prior to applying to be a member of a trade union seems completely unenforceable. It would take for ever to prove how long someone has been a member. Was it from when they filled in the application form? Was it from when the application form arrived? It seems completely mad to have something so specific, when we are talking about much broader principles in respect of freedom of association, and membership of political organisations and trade unions. I should like an explanation of the provision.

Brian Binley: I support the clause wholeheartedly. I wish that it went further. It does not, so I shall speak to the amendment itself. I do not like the fact of making decisions that are based on a persons association, particularly with a political party. Parties are broad churches and for a trade union to be able to assume that it can take such action, be it to take into account membership of a political party for 12 months or otherwise, seems to be a dangerous premise.

Michael Jabez Foster: Has the hon. Gentleman noted the wideness of the BNPs policies? I have not noted them to be in any way integrationary or prepared to consider having members of different creeds unless they maintain the white supremacy rule. That is not the sort of party that most trade unions want to have in their path.

Brian Binley: I will be delighted to answer that. My record of standing up against the BNP is second to none. I do not like any implication that it might not be, and I will not accept it.

Michael Jabez Foster: Will the hon. Gentleman give way?

Brian Binley: Hang on. I will finish the answer to the question, which I found frankly offensive. Many good people in this countrythis point has been raisedwere members of the Communist party at a time when Stalin was killing 16 million people. Are we to say that, because of that association, they should not be members of the Law Society, of a trade union or indeed of any organisation with an impact on employment? I would argue that that is not the case, but my point is that we should be dealing with the individual and the individuals characteristics, not with what might be said about the people with whom they associate. Freedom of association is an important factor in that respect too, and it seems to me that the balance struck has not taken that perspective into account. I argue for all our freedoms in that respect, and I would have hoped that the hon. Gentleman would see that to be the case.
I am also concerned that the amendment, which I will support as the lesser of evils, recognises that when dealing with such membership, a persons association can be noted rather than their own standing and beliefs, recognising that political parties are broad churches. That could swing round and hit all of us where it hurts if we are not careful. The thin end of the wedge, in that respect, is dangerous. Before I am questioned again, I repeat that I have stood alongside my colleague the hon. Member for Northampton, North (Ms Keeble) when we were threatened with a BNP march, waiting for them to come to the station. The whole ethos of the British National party horrifies me, as does much of the ethos of the Communist party.
My point is about judging an individual on his own worth, not on the basis of association, which we all choose for good or bad. There are a number of things that I do not like about the Conservative party, but I make a decision. I am sure that there are lots of things that the hon. Gentleman does not like about the Labour party, but one makes a decision. Let us judge a person on his individual character and views, not on the groups with which, for one reason or another, he might associate himself.

Patrick McFadden: These two amendments deal with the issue of when someone is a member of a political party and the definition of a political party for the purposes of the clause. Were the amendments to be passed, those definitions would of course apply across all the various subsections of section 174 of the Trade Union and Labour Relations (Consolidation) Act 1992.
Amendment No. 17 deals with the definition of party membership in terms of time. The amendment would limit trade unions ability to expel or exclude people by requiring the unions to disregard any party membership that ended more than a year

Hugo Swire: Will the Minister indulge those of us on the backest of the Back Benches by speaking up a little bit, so that we can catch every word?

Patrick McFadden: I am happy to speak more loudly, although I was trying to calm the Committee down after the last exchange.
As I said, the amendment involves disregarding any party membership that ended more than a year before the person applied to join a trade union. The issue was also raised in the other place when the Bill was discussed there. I appreciate what is being said with genuine feeling in the Committee about freedom of belief and the important principle enshrined in that. We all hold that dear. The judgment that gave rise to the legislation was about balancing the freedom of such belief with freedom of association and the rights of union members to have a view on with whom they wished to associate. So, there is a balance of freedoms here. The judgment concluded that unions should be free to decide, in accordance with their rules, questions concerning admission and expulsion.
I shall quote from the judgment, as I did this morning. The judgment noted that unions often hold particular views. Paragraph 39 states:
Article 11 cannot be interpreted as imposing an obligation on associations or organisations to admit whosoever wishes to join. Where associations are formed by people, who, espousing particular values or ideas, intend to pursue common goals, it would run counter to the very effectiveness of the freedom at stake if they had no control over their membership.
We as political parties have some control over membership. In my party, over the years, we have expelled people for various crimes. I remember that particularly a couple of decades ago, when I was starting out in politics and party membership. Of course there has to be due process, natural justice and so on, but it is not beyond the bounds of reason that a collective organisation, such as a party or trade union, could expel or exclude an individual. The judgment was drawing attention to that kind of balance.

Brian Binley: I make the point that when ASLEF appealed its case it was for a member who had been expelled because he was a member of the BNP at that time. Indeed, if that were the case in point, that is finethere is protection there. My concern in this respectalthough I understand that my concerns overall are stand part argumentsis that there is no time limit to all of this. In given instances, the union can be vindictive and victimising just as much as an employee can. It is the time frame that allows that to happen, and not the actual membership. If the provision was restricted to membership, I would understand it more, but if the union has an open-ended option to take action on the basis of what is said to be a given history, I find that much more difficult to accept.

Patrick McFadden: I shall come on to the issue of former membership. I understand the hon. Gentlemans point. In the case of former members, it may be that someones views remain exactly the same, even though they are no longer a member of a particular political party. It may be that their views have changed. Either case could be true. In the latter case, provisions in clause 18(2)the proposed new subsections (4G) and (4H) of section 174 would apply. Those provisions require a trade union to act in accordance with its rules; they say that there should be a fair opportunity to make representations, which should be considered fairly. That is, precisely, the natural justice point made by Lord Morris of Handsworth that I quoted this morning. If, for example, someone had had a brief flirtation with an extremist party in their youth, many years before, as the hon. Member for Huntingdon said could be the case, but that this was very different from their views today, that would be properly considered under the protections and provisions in the clause.
There is a further point. The effect of the amendment would be that anyone joining the BNP or a similar organisation after they had joined the union would be in a position where it would not be legal to expel them, because the emphasis of the amendment is on the 12-month period before joining the union. In practical terms, there is a significant problem with the amendment, apart from the fact that it seems to be based on a lack of recognition of the protections that have been built into clause 18.
I refer to the points made by my hon. Friend the Member for North-East Derbyshire, who said that the amendment would result in unions being expected to know the dates when individuals were registered as a member of a party when even the parties themselves may not know that.

Mary Creagh: We had a debate on Tuesday about the difficulties that enforcement officers have in acquiring records and copies of documents from employers. Does the Minister agree that the amendment would place an onerous imposition on trade unions if they were expected to go into the headquarters of the BNP and ask for its membership records, and does he think that the records would be up to date or freely given to trade unionists?

Patrick McFadden: That illustrates the practical problems associated with accepting the amendment. As my noble friend Lord Bach said, it would result in trade unions and a member in such a position playing cat and mouse, and a process that could produce a platform for vexatious actions. As I have said all along, this is delicate territory and we have to proceed with care and caution. That is why safeguards have been built into the clause that take account of the issue raised by the hon. Members for Northampton, South and for Huntingdon about a youthful flirtation that was left behind many years before.
I would also like to say a few words about amendment No. 18, which seeks to provide a definition of political party. We do not believe that it is necessary. The statutory provisions limiting the ability of a trade union to exclude or expel persons for their party membership were first introduced in 1993. No definition of political party was thought to be needed at that time, and there has been no evidence since then that not including a definition in the legislation introduced by that Government has caused a problem.
I should also point out that although including registration with the Electoral Commission in a definition of a political party would cover most parties, it would not cover every political party in the country. Emerging parties or parties that do not stand for election in their own name do not need to register. That is precisely the territory that we are talking about with extremist organisations.
There is also a difficulty with the foreign aspect. It is true that it was discussed in the other place, but how can we assume that every other country has equivalent registration systems? I doubt that that is the case. Again, the amendment would create practical hurdles that unions would find well nigh impossible to overcome.

Nick Palmer: Following up on my point about Thompsons Solicitors, would the Minister agree that, in practice, a trade union would be able to have a rule to exclude members of parties with a racialist ideology, or something general, rather than specifying a particular name?

Patrick McFadden: My hon. Friend is right to draw me back to his point. I draw his attention to subsection (2):
Conduct which consists in an individuals being or having been a member of a political party.
It does not say that the union must specify in the rule book the exact name of the political party. That also came up in the other place, where on behalf of the Government Lord Bach said:
Membership need not be of that political party but of any political party whose values contravene the unions rules or objectives.[Official Report, House of Lords, 2 June 2008; Vol. 702, c. 28.]

Michael Jabez Foster: My reading of subsection (2) is that that is where the problem lies, because, to refer to it more fully, it says:
Conduct which consists in an individuals being or having been a member of a political party is not conduct falling within subsection (4A) if membership of that political party.
The reference to that political party seeks to provide a particular rather than a more general definition.

Patrick McFadden: My reading of the provision is that that reference relates to the political party mentioned above. I hesitate to differ with hon. Members who have good legal knowledge, but our view is that it does not require the specification of named political parties in the union rule book. I think that that is at the heart of my hon. Friends concern.

Brian Binley: Therein lies the concern. The Minister said that someone should not be banned because of a youthful flirtation. We have all had youthful flirtations in one way or another, but they are not matters for debate today. To quote Paul on the way to Damascus, a person can change his belief on an action instantly. It seems to me that therein lies the problem, because someone who was a member of the British National party, the Communist party, the Nazis or God knows what else that we might find abhorrent may decide that they no longer believe in that. That is why I argue that the issue should be an individuals view, not their association.
I do not understand why the matter cannot be cleared up by saying that if an individuals views clash with the constitution of a trade union, that individual cannot be a member. I cannot see that the issue is association. Will the Minister explain why many members of the Labour party who support me in Northampton were adamant that they would support Tony Blair five years ago? People change their minds. The issue is not time. Time is an instant.

Martin Caton: Order. Interventions are becoming rather long, and sometimes are off the subject.

Patrick McFadden: The hon. Gentleman asks why the provision is about membership of a political party. That was the nature of the case that was taken to the European Court. As the hon. Member for Huntingdon said, since 1993, capacity has been in place for a union to expel or exclude someone on the basis of conduct. The change in clause 18 arises from that case, and refers to membership of a political party. The Governments task, and our task as a Parliament, is to try to find a clause that matches the requirement imposed on us by the European convention judgment, but also does that in a way that preserves natural justice for the individual. That is what we have tried to do through clause 18.
If I may return in seriousness to the point about youthful flirtation, the safeguards that we have built in for representations to be made, considered and so on will provide ample opportunity for someone to say, That was a long time ago in my youth. I cannot understand why a trade union would want to expel or exclude someone in such circumstances.

Natascha Engel: The ASLEF v. Lee judgment is unusual, and the circumstances hardly ever arise. We are trying to legislate for an eventuality that does not happen often, and we must recognise that the circumstances would be extreme.

Patrick McFadden: I agree with my hon. Friend. As I said this morning, unions are recruiting members and trying to attract people, not rooting through their lists trying to get rid of people.

Barry Gardiner: The hon. Member for Northampton, South said that this matter should be about an individuals views rather than membership of a party. Perhaps he should walk down the corridor and look at that wonderful painting of Queen Elizabeth I, where she is saying that she has no desire to make a window into mens souls. The individual view is private, whereas membership of a party is a public representation of certain views and an expression of them. That is an important distinction. The hon. Gentleman would not want a Big Brother state that inquired into what each of us privately thought, any more than I would. Going down that route would be very dangerous.

Patrick McFadden: My hon. Friend makes the point well and more eloquently than I could. I am drawing to a conclusion. I talked about the difficulties of finding where foreign political parties were registered and so on.

John Baron: The hon. Member for Brent, North made an excellent point that, in turn, argues against the legislation as a whole. The legislation seeks to do exactly what he referred tomake a window into mens souls, and judge somebody on their beliefs rather than their conduct.

Patrick McFadden: I thought that this quarrel among Conservative Front Benchers could be sorted out. It happens with every amendment.
The hon. Member for Huntingdon, whom I believe is also the shadow Solicitor-General, told us that his partys position is to legislate in line with ECHR judgments. Twice, the hon. Member for Billericay has indicated that he does not wish to do so, and objected in principle to the legislation being introduced at all.
Either the Conservative party believes in legislating in line with ECHR judgments or it does not. If it does, as the hon. Member for Huntingdon, the Front-Bench spokesperson, said, the issue is about how we can meet that judgment. If it does not, that is a significant departure, which has been mentioned twice by the hon. Member for Billericay and which will be noted. The Conservative party must make up its mind.

John Hemming: I take issue with one of the assertions made by the hon. Member for Billericay. The decision to join a political party is a conscious decision to do just that. It may or may not express views. I would not wish to see legislation based on expressing views, but this matter is about the conscious act of joining a political party and the freedom of association.

Patrick McFadden: As I said in response to the hon. Member for Northampton, South, the judgment was about membership of a political party.
Finally, I draw the Committees attention to the difference between exclusion and expulsion. Expulsion would be when someone was already a member of a trade union, and exclusion when someone was not a member but sought to join. In that sense, amendment No. 18 might be problematic as it seems to deal only with the exclusion of those seeking union membership. If a political party were established after an individual joined a trade union, I am not sure whether that would be covered.
In summary, I stress again that this is delicate territory, but the amendments go well beyond what is required to comply with the judgment. They could make it impossible for trade unions to use the powers in clause 18, even when in line with the safeguards set out in the clause, which cater for instances such as those quoted during the debate. On that basis, I hope that the Opposition will not press the amendment.

Jonathan Djanogly: The judgment was certainly about membership of a political party. Amendment No. 18 defines what constitutes a political party. Would anyone who heard this debate have a clear idea as to what constitutes or is likely to constitute a political party? I do not think so. I submit that there will be court cases based on what constitutes a political party.
The hon. Member for Broxtowe gave a thoughtful speech, using the example of Combat 18. We have to ask whether that is a political party or just a movement. That is highly debateable. Does hanging out with the same group of people in a particular place without a membership card make one a member of a political party? Does a group all wearing a T-shirt saying Combat 18 constitute a political party? On what basis is a member of Combat 18 a member of a political party? Another example that comes to mind is the Militant Tendency, which it called itself a newspaper rather than a political party. That was a highly debateable point. We could debate it again today.
My point is that we are creating legislation that will lead not to less review and fewer court cases, but to more. We have seen that organisations such as the BNP are quite prepared to go to court and test this kind of thing. Do not think that this will be the end of it. Our suggestion is that we must tie the matter down.

Patrick McFadden: The point about the potential for litigation is important and valid. My point is that the kind of extra conditions contained in the amendments would be likely to give more grounds for litigation to the people that the hon. Gentleman is worried about.

Jonathan Djanogly: I disagree. If someone is a member of a registered political party, that is a lot more certain than anything else that we have discussed. I appreciate that the amendments might not be perfect. If the Minister were to come up with other suggestions, we would be prepared to discuss them.
As the hon. Member for Broxtowe said, a party could change its name, but that is unlikely. The more popular political parties are unlikely to want to change their names regularly. He also said that one of the advantages could be that BNP members would end up going into their own unions. I do not wholly agree with that as a valid course of action. It smacks of the Italian fascist corporatist unions. Although this is not directly relevant to the debate, I do not think that that would be an effective way to negate BNP or fascist action in this country.
On the arbitrary 12-month period, if the hon. Member for North-East Derbyshire thinks that it should be two or three years, we are prepared to discuss that. In principle, the idea that someone can be excluded from a union or anything else because of something that they were involved in 20, 30 or 40 years ago is conceptually wrong and unfair.

Natascha Engel: The hon. Gentleman is trying to legislate for something that I do not think will ever happen. The idea that a trade union might be purely vindictive and get rid of somebody because 40 years ago they were a member of such-and-such an organisation just will not happen.

Jonathan Djanogly: I assure the hon. Lady that in Nazi Germany a persons membership of the Communist party 20 or 30 years previously may well have been taken into account in deciding how they were dealt with. Such treatment is therefore conceptually possible. As to whether it has happened in this country, I do not have any proof. Is it conceptually possible? Is it a fear that as legislators we should be looking at? I think it is.

Natascha Engel: The point is that we do not live in Nazi Germany. If we are legislating on the basis that we are living in Nazi Germany, we should start all over again.

Jonathan Djanogly: I see myself as a guardian of democracy in this country, and I hope that all of us do to some extent.

Michael Jabez Foster: Is it not the case that Nazi Germany did not have proposed new subsection (4H), which will impose reasonableness? With respect to the hon. Gentleman, any of those bizarre examples, such as someone who was a member 20 or 30 years ago, would be unreasonable unless their conduct had been different in the meantime.

Jonathan Djanogly: I think that I have made my point.

Brian Binley: Does my hon. Friend agree from his history lessonsI lived through itthat vindictiveness occurred in the union movement consistently in the 1970s? Before saying that it did not, one should talk to many of my friends who fought that battle in Nottinghamshire and other parts of the country. It may happen again, and we need to be aware of that when we are writing law. We are not writing law for a week or a month; we assume that we are writing law for a long time indeed, and we must take that into account.

Jonathan Djanogly: I totally agree with my hon. Friend.

John Hemming: Does the hon. Gentleman agree that the price of liberty is eternal vigilance and that our role is to ensure that the laws operate properly and protect people against vindictive actions? Although I would disagree with him on this occasion in valuing the right of voluntary association where a person does not suffer any disadvantage as an important issue to be taken account of, it is our responsibility as hon. Members to protect the freedoms of the people of this country.

Jonathan Djanogly: I agree that eternal vigilance is certainly one of our duties as legislators. The ban is based on being a member of a political partywe are agreed on that.
Another thing came to mind as the Minister was making his remarks. I argued, as others have been arguing, that a persons views may change over time, but there is another aspect: over 20 or 30 years, the political partys views may change as well. The Conservative party of 30 or 40 years ago is not the Conservative party of today, so it is not only peoples views but parties views that change. What might have been a racist party might not be after 30 or 40 years, and vice versa.
The more we look at the legislation, the more we see holes in it and ways in which it will be challenged. What we have seen in the other place and what we will, I hope, see today is an Opposition who say, Yes, we appreciate that the legislation is necessary, but we are not quite happy with where we are at the moment, or What we have is not going to work, and we have been producing different ways forward. It would be helpful if the Government gave some thought to how such points could be firmed up, so that we could return to it at a later stage.

Nick Palmer: The hon. Gentleman has gone some way to persuading me that there is a difficulty in the political party definition. I am not sure whether he is raising it as a practical objection or as part of a wish to constrain the activity of trade unions. My conclusion is that we should perhaps replace the term with political association or movementin other words, draw the definition more widely. His approach of limiting it to parties defined in the Bill would work.

Jonathan Djanogly: I have said openly, as has my hon. Friend the Member for Billericaythe Minister tried to create some sort of difference between us on thisthat conceptually, we do not like the legislation. We do not like the clause; we are concerned about its overall impact on civil liberties. However, we respect the ECHR and realise that it is our starting point. We are not trying to overturn the ECHR decision and certainly not the ECHR, which was the extra world that we got into. We are where we are, and we have made our point. I will go away, look through the Hansard report of todays debate and think again about how we can review the amendments before the Bill is considered on Report, because we will certainly want to raise that issue again. In the meantime, we are willing to discuss it with the Minister and hope that there will be movement on it before Report. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Michael Jabez Foster: I must confess a prejudice. My prejudice is against the BNPthere are some other political parties that I do not like either, but I forgive them. The BNP are an obnoxious bunch, and many hon. Members agree. Fascists, like chameleons, change their appearances. My first concern is how unions can clearly define the sorts of organisations that are contrary to their purpose, although my hon. Friend the Minister has dealt with this point to some extent. I am grateful to him for defining the point about the term political party being wide enough so as not to be too prescriptive in excluding or including groups that are contrary to the purpose of trade unions.
I do not understand why trade unions should not be able, in the main, to do as they wantpolitical parties do. If one cannot join political parties in some parts of the countrythat is not so much the case these days but certainly was in the pastthat creates detriment. As political parties, we can decide who we want in our membership, and if someone has already joined a party whose views are inconsistent with ours, we do not have to take them on. Even the Fabian Society states that one must not be ineligible for membership of the Labour party, which means that one cannot be a Tory, because one cannot be a member of the Labour party if one is a Tory party member. Those sorts of thing seem to be obvious.
It seems perfectly proper that voluntary organisations should be able to exclude people who are not their fellow travellers. My worry is that that might still be too restrictive. We now know that the ECHR has decided that the right to association by the unions will, in all but one situation, lead to that having prominence over the human rights of the individual. The exception to that is laid out in proposed new subsection (4G), to which the Minister referred this morning, in cases where
the individual would lose his livelihood or suffer other exceptional hardship.
The loss of livelihood could never occur now because there are no longer such things as closed shops, so I am not sure what the exceptional hardship could be. I cannot think of an example in which exceptional hardship could be imposed on anyone simply because they could not join the club. This morning we heard all sorts of examples of inconvenience, such as not being able to go on holiday in the west country and losing the right to free legal advice, but exceptional hardship seems to be such a test that it is almost inconceivable that simply losing ones union membership could be so described, and we discussed that earlier.
Furthermore, the other issues set out in the new clauses that the House of Lords suggests are imposed make me worry about the possibility of significant litigation on some issues. An example is the business of the reasonable practicality of knowledge. What is the reasonable practicality of knowing whether the union had brought a policy that the new member did not know about? The test in proposed new subsection (4D) creates a test of reasonable practicality in the knowing of the objectivesit looks like a minefield. A BNP member might well find a fellow traveller who is happy to come along and say that he did not know about the objectives of the union. What will happen? Is the trade union to bring a bus-load of shop stewards and say that everybody should know about it if they turn up to their branch meetings? I just do not know why it is all necessary.
I have not tabled an amendment this afternoon. The Minister has worked really hard to strike the right balance in the Bill, and whatever he does, there will be people who will disagree with himhe has a tough job and I congratulate him on his efforts. As far as I can see, however, the bottom line is that the ECHR has made clear its point that under very rare circumstances onlyexceptional hardship, for examplea trade union might be unable to expel someone. Unless he knows of other such circumstances and if all the other provisions are simply window dressing designed to comply with what the House of Lords said, will he reconsider whether the provisions are necessary? Would it not be just as simple to return to the drafting in the original Bill? Might that not serve his purposes well and do what he has been trying to do throughout the Bill, which is to simplify and clarify employment legislation, so that the employeethe union member, in this caseknows precisely what is intended? Perhaps the BNP will not even bother to join unions in which they are not welcome.

John Hemming: Most of my points have been dealt with during the discussion on the amendment. The debate is primarily about freedom of association, voluntary association and peoples right to decide not to associate with certain other people. I would share hon. Members concerns if we tried to legislate on that within statutory organisations.

Natascha Engel: I apologise for not having said what a delight it is to serve under your chairmanship, Mr. Catonit is, of course. I declare an interest in that, before I was elected to Parliament, I worked as the trade union liaison officer at the Labour party and, after that, with trade unions organising their political fund ballots, so I understand unions and how they work. They are very broad churches, beyond even what has been said here today. I remember working quite closely with people in unions and workplaces who were members of other political parties. Before I did that job, I was a trade union organiser.

Stephen Crabb: On the hon. Ladys point about trade unions being broad churches, is that not borne out by the fact that the majority of trade union members voted Conservative in 1983, 1987 and, I think, at the last election?

Natascha Engel: I cannot comment on that, because I do not know the facts. Trade union members are members of lots of different political parties, and everybody who calls themselves a democrat should support that. Although I would say that a working persons rights are much better represented by the Labour party than by any other party, I would still die in a ditch for their right to join any other political party, if that is what they wanted to do. We are overlooking that important fact. Trade unions are very broad churches. The circumstances that we are legislating for are very rare.

Brian Binley: Having been a trade unionist, I understand the hon. Ladys point. I was a member the Union of Shop, Distributive and Allied Workers and worked for the co-operative movement in the bank, as I have said before. However, although the unions are very reasonable at the moment, they have not been in the pastfor example, when a specific group took hold of a region or branch and caused havoc. Havoc was caused to members of the Labour party, let alone to members of other parties, whether Conservative or Liberal. Does she recognise that we must write law with that possibility in mind? That is what the debate is about.

Natascha Engel: I do not entirely disagree, but the hon. Gentleman must also recognise that that is just politics. It might be a bit annoying and sometimes really painful, but havoc is politicsand legitimate politics, too, even if annoying. We must also recognise the difference between serious extremism, which the hon. Gentleman was so passionately angry about, and xenophobia and racism, both of which the BNP, as a political party, represent, which we all hate fundamentally and which are, importantly, fundamentally anti-democratic. The mainstream political parties, as well as trade unions, are democratic organisations. Again, that is another point that we must recognise.
We have also recognised in our debates, in terms of freedom of association and freedom of speech, that there are big political parties and trade unions. Those points have been raised time and again during our sittings. Freedom of association and freedom of speech are fundamental to democracy, and we all support those things. It is important to remember that this is about members in membership organisationstrade unions and mainstream political partieshaving the right and the ability collectively to determine the rules of those organisations, as well as collectively to change them. Extremism absolutely undermines those democratic principles.
If a trade union or a political party decides collectively that it finds extremist views unacceptablenot just in principle, but as part of the ethos of the organisationit should be within the rights of those organisations to expel people with those views. As my hon. Friend the Member for Hastings and Rye said, if no hardship is suffered as a resultthere is no longer a closed shopthat should be within the rights of those organisations.
As the hon. Member for Northampton, South mentioned earlier, if an individuals beliefs run so contrary to the organisationin this case, a trade unionthat they undermine everything that it represents, he or she should go. I support their going. The proposal is trying to enshrine in law the ability for a trade union or other organisation to get rid of a person if the organisation has collectively decided and judged that they are contrary to everything that it represents. Another fundamental point is that the ECHRs decision on this matter was all about transparency and the ability to do that within trade union rules. That is all that I want to say about that. The clause supports all the things that we have been talking about today. Most members of the Committee agree that these are fundamental democratic principles.

Patrick McFadden: My hon. Friend the Member for Hastings and Rye is right on one pointwhichever way people move on this issue, somebody is ready to tell them that they have gone too far or not far enough. That goes with the territory. To govern is to choose. Our responsibility is to try to get this right.
The thrust of the amendments is that there should be more conditions. The question is whether we have gone too far in respect of this power, and that is the judgment that we have had to make all the way through. I said in my first comments this morning that the Government changed our view as the debate went on in the other place. We canvassed two optionsa broader option, to which the hon. Gentleman is encouraging us to return, and an option broadly in line with the clause as it is now. On balance, we have taken the view that although both those options would meet the legal requirement to legislate in line with the ECHR judgment, we should give unions the power that the judgment recommends. However, there was also a strong case for due process and safeguards in the exercise of the power, and that is what the clause tries to do. Hon. Members on both sides of the Committee will have their views on whether it does so perfectly.

John Baron: I appreciate that the Government are not in an easy position and that finding the right compromise is difficult, but will the Minister, for the sake of clarity, give us his definition of a political party?

Patrick McFadden: For me, a political party is the kind of organisation that I joined. It is no more necessary to define that now than it was when the hon. Gentlemans party introduced the 1993 provisions and felt no need to enshrine such a definition in law.

John Baron: For the purposes of the Bill, some regard clearly has to be given to the term, political party. Will the Minister give us his definition of that term?

Patrick McFadden: I am not sure why the hon. Gentleman feels that it is more necessary to define that term today than it was when the Government whom he supported introduced their legislation, which made a distinction between party and conduct that had not been in previous legislation.
We should not lose sight of the safeguards, which we have discussed one by one and which are set out in proposed new subsections (4G) and (4H). They state that a decision to exclude or expel should be taken in accordance with the unions rules and that it should not be done unfairly. We have been over the point about exceptional hardship. Fairness is defined as notice of the proposal to exclude or expel being given to the person with reasons and there being a fair opportunity to make representations, which should then be considered fairly. Most of us would recognise that as being due process that allows somebody a legitimate voice in a decision of this kind. This is delicate territory. We have to legislate with care and caution, and we should do so in line with the Courts judgment. The Government have always taken the view that it was right to bring our legislation into line with that judgment. As the debate has progressed in the other place and in Committee, we have concluded that it is right to do so in this legislation, with the safeguards that I mentioned enshrined there.

Question put and agreed to.

Clause 18 ordered to stand part of the Bill.

Clauses 19 and 20 ordered to stand part of the Bill.

Clause 21

Commencement

Patrick McFadden: I beg to move amendment No. 20, in page 18, line 16, leave out from beginning to second on in line 17.

Martin Caton: With this it will be convenient to discuss the following: Government amendment No. 21.
Government new clause 8Employment agencies and national minimum wage legislation: information-sharing.
New clause 3Exchange of information between National Minimum Wage and Employment Agency Standards Inspectors
(1) After section 9(4)(a)(iv) of the Employment Agencies Act 1973 (c. 35) there is inserted
(v) to a National Minimum Wage inspector of HM Revenue and Customs for the purposes of the exercise of their respective enforcement functions under the National Minimum Wage Act 1998 (c. 39)..
(2) After section 15(4)(b) of the National Minimum Wage Act 1998 (c. 39) there is inserted
(c) may be supplied by, or with the authorisation of, the Secretary of State to an inspector of the Employment Agency Standards Inspectorate for the purposes of the exercise of their respective enforcement functions under the Employment Agencies Act 1973..

Patrick McFadden: We move on to a different subject, which is proposed in two very similar new clausesnew clause 3 and Government new clause 8. Earlier on in our deliberations, we talkedat least, I talkedabout the Governments vulnerable worker enforcement forum, which has met over the past year and considered a number of issues in relation to the vulnerability of people at work and their capacity to report abuses, and the enforcement agencys capacity to act on those reports. That is important in terms of the rights of vulnerable workers, in terms of legitimate businesses, and in terms of the taxpayer, who legitimately wishes to see the most effective use of their funds in the enforcement of the law.
The forums report, which was published in August, sets out a programme to improve basic awareness of employment rights, to facilitate and encourage the reporting of abuses and to take steps to join up the workplace enforcement bodies and enhance their profile. One key issue that the forum identified was the need for closer working between the enforcement bodies. An important element of that is the ability of the bodies to share information about non-compliance. That is addressed in the new clause in my name and in that tabled by the Liberal Democrats.
As the forum recognised, there are currently barriers to effective information sharing between some of the enforcement bodies, including between those that enforce the national minimum wage and those that enforce employment agency legislation. The Employment Agency Standards Inspectorate can contact Her Majestys Revenue and Customs, which enforces the minimum wage, about potential non-compliance with the minimum wage only before it has undertaken an inspection when a complainant has clearly stated that there is a minimum wage issue or where that is clear from the complaint. Once an inspection has started, the current legal position is that it would be an offence to disclose information obtained during the inspection. In those circumstances, the agency standards inspectors can only advise the complainants to contact the minimum wage helpline.
Information about compliance with the minimum wage does not always come to light until the inspection is carried out, by which time it would be too late to pass from one agency to another. Clearly, there would be value in the inspectorate being able to contact HMRC after an inspection has been carried out, rather than having two sets of inspectors working in silos, where once they had started their work, they were not able to communicate with one another. The converse is also true: the restriction on minimum wage officers being able to share information about breaches of the law with regard to employment agencies or details of non-compliant employers represents a similar barrier in the other direction.
The minimum wage enforcement team at HMRC visited 122 employment agencies last year during the course of its national minimum wage enforcement. Of those, 30 were found to be non-compliant. Those 30 agencies may be non-compliant in other ways too, so this is valuable and important information sharing. There is really only one difference between the two clauses dealing with this issue. The new clause in the name of the Liberal Democrats deals with the particular bodies I mentioned in my remarks, that is HMRC and ASI. The new clause in the name of the Government deals with the Acts, which in terms of future-proofing, should give us a little more flexibility to ensure that, were we to go down that road, even if the bodies enforcing the provisions under these Acts change in the future, the information-sharing permission which we seek to gain through this new clause could continue.
Much of this information between enforcement bodies is not a matter of principle. It is more to do with when the founding legislation for a particular body was passed by Parliament. For example, the Gangmasters Licensing Authority which was established a couple of years ago does not have this gateway problem of information-sharing. No one has suggested that the fact it does not have such a gateway is a problem. We are seeking to bring other bodies into line with that. Nor do I pretendand it is important to stress thisthat with the passage of this new clause we will have entirely dealt with the difficulty of information-sharing between different enforcement bodies in the employment field. What we would be doing is taking the earliest possible legislative opportunity after the publication of the vulnerable worker enforcement forum report to address the issue in the context of agency standards and minimum wage. Although I am grateful to the Liberal Democrats for tabling the amendment that addresses the same issue, I believe that operating on the basis of the legislation rather than particular bodies may be a better way to do it and I hope that hon. Members agree.
Amendment No. 21 provides for a commencement by order of new clause 8 and is therefore consequential to it. Amendment No. 20 deals with the passage of time. In the dim, distant and hopeful past there was a possibility that this legislation may have completed its parliamentary passage by now and, as hon. Members will be aware, the Government take the view that when bringing in new legislation which has an effect on employers or businesses, that it is best to do that on one of two common commencement dates so that employers know when changes will come into force. Hon. Members will see that clause 21 as it stands at line 16 refers to 1 October 2008 as a possible commencement date. That date has clearly passed. By my watch, that is 15 days ago and this amendment simply takes account of that to ensure a commencement date that is in the future.

John Hemming: I will not press new clause 3. It is not worth arguing about the difference between it and new clause 8 which was tabled afterwards.

Jonathan Djanogly: Regarding Government amendment No. 21, well spotted to the Minister or perhaps others in his team. As for Government amendment No. 20, yes, I fully appreciate that employers like to know when things are coming up.
My main concern about new clause 8 relates to safeguards. Will the Minister explain what safeguards he is proposing concerning the information that will be kept? Will he please outline how such information will be stored, how and when it will be transferred and when it will be disposed of? The concern for small businesses is that once in the system they will face arbitrary investigation as their details are passed from one agency to another, perhaps on an ongoing basis or for ever. Given the problems of lost data suffered by various Departments, will the Minister assure me and small businesses that information will be transferred only when absolutely necessary? I am interested to know how the information transfers will take place. Will it be through a centralised searchable database or by specific transfers on request? My concern is that there may be additional administrative and financial costs, when a simple phone call between investigators might be adequate.
My final concern is with the phrase any purpose relating to that Act, which is used extensively throughout new clause 8. It strikes me as the sort of broad umbrella term that could hide a host of things. What safeguards are there to ensure that this requirement will be complied with? Should we not have more definite parameters than any purpose relating to the Act within the Bill to ensure that the courts are not flooded with cases to interpret that phrase?

Patrick McFadden: The hon. Gentleman is right to ask how the clause will work and what we have in mind. As I said in my opening remarks, when a minimum wage officer or agency standards inspector is called to inspect an organisation because of a report, if they feel that there is also a high risk of non-compliance in the other field of law, they may tell the other enforcement body about it instead of two sets of inspectors going in. Officers will be able to pass on information about a business that is found to be non-compliant. I also said such provisions operate without difficulty for the Gangmasters Licensing Authority. As hon. Members may be aware, that body operates in the field of agriculture and food production. The agency standards inspectorate works in the rest of the economy.
I would like to reassure the hon. Gentleman on the issue of data loss. We are not talking about the mass transfer of personal data, but the inspection of employment premises with a view to ensuring that they adhere to the law. We are fully aware of the concerns that he raised and we take them seriously.
New clause 8 will not affect the legal restrictions that prevent agency standards inspectors and minimum wage officers from disclosing information to other bodies. The phrase any purpose relating to that Act should not be too wide. It limits the use of the information to the enforcement of the two pieces of legislation that are specified. Both pieces of legislation contain criminal sanctions for disclosure that is not for the purposes of the legislation.

Brian Binley: There is a concern, particularly from small businesses, aboutI was about to say policing by consent, but perhaps inspecting by consent is a better phrase. First, it takes a lot more time proportionally for a small business to deal with these matters than it takes in a larger business. Secondly, if there is a fear that inspection by one authority might lead to lots of other inspections, there is a tendency to become defensive. That defensive mechanism is not helpful to any of us.
I understand the need to ensure that those who are wilfully trying to get round provisions such as the minimum wage should be treated in the way that we would all wish to see. They should be paying the minimum wage; there is no doubt about that, but I want the Minister to assure me that it will be applied sensitively. I can see that, particularly over the next two or three years, if we made a purgeI know that that is not in the Ministers mindor if any officers made a purge, it could be disruptive and make it more difficult for small businesses to operate in the way that we all want them to.

Patrick McFadden: I agree with most of what the hon. Gentleman has said, but there is another side that we have to consider. He referred to some of the earlier deliberations on the Bill and to what happens when the inspector callsI think that that was the phrase he used. The amendment would mean that rather than having a series of inspectors calling about different legislation, they would be able to talk to one another in a way that they are legally prohibited from doing at the moment. I accept what the hon. Gentleman says about small businesses not wanting repeat visits, but I think that the provision could result in fewer repeat visits rather than more. I appreciate the difficulties of the small businessI represent the Department of business and, of course, we want small businesses to prosper. We fully appreciate their value.
However, we must also place ourselves in the shoes of the vulnerable worker, who does not know, and legitimately cannot be expected to know, what to do if they face problems at workfor example, if an agency supplied them to an employer and charged them illegally for finding them work, and they were possibly not paid the minimum wage or the holiday and other pay to which they were entitled. Surely we should try to improve the current situation, in which a person can find themselves having to phone different Government helplines to try to report the problems. As far as they are concerned, they just want to report their problem to the Government. They do not know that the agency standards inspectorate is part of BERR and that HMRC is part of the Treasury, or about friendly and proper agreement about the enforcement of the minimum wage.
Through a lot of the work on vulnerable workers, we are trying to transfer more of the burden of navigating the system from the vulnerable worker to the Government. That is certainly in the interests of the vulnerable worker, but I stress that it is also in the interests of good and legitimate business. The hon. Gentleman asked us to work with sensitivity. I absolutely believe in working with sensitivity, but there must be a tough edge to law enforcement on these areas, because we are dealing with vulnerable workers and an overall theme of the Bill is that enforcement has to get tougher.
I took issue with the hon. Member for Solihull, who is not with us today, when she raised the idea that, with the resources of the minimum wage inspectorate, the chances of inspection were once every 300 years. We do not want an inspection regime that simply sends people round the country for no reason into legitimate businesses that are obeying the law, paying and treating their workers properly and so on. We want it to be risk-based and targeted, in the interests of business and of the taxpayer. We will operate with sensitivity, but we are also determined to enforce the law. The new clause will help us to do that more effectively.

Amendment agreed to.

Amendment made: No. 21, in clause 21, page 18, line 19, leave out section 18 comes and insert
sections (Employment agencies and national minimum wage legislation: information-sharing) and 18 come[Mr.  McFadden]

Clause 21, as amended, ordered to stand part of the Bill.

Clause 22

Short title

Patrick McFadden: I beg to move amendment No. 2, in clause 22, page 18, line 29, leave out subsection (2).
I do not need to detain the Committee with this amendment, which is a technical change to remove the privilege amendment made in the other place. Hon. Members will be aware that the financial powers of the other place are restricted by the rights and privileges of the House. The text in subsection (2) is inserted in all Bills with financial implications that begin their life in the other place, and it is standard procedure to remove that privilege amendment after Second Reading in this House.

Amendment agreed to.

Clause 22, as amended, ordered to stand part of the Bill.

Schedule agreed to.

New Clause 8

Employment agencies and national minimum wage legislation: information-sharing
(1) In the National Minimum Wage Act 1998 (c. 39), in section 15 (information obtained by officers), after subsection (5) there is inserted
(5A) Information to which this section applies
(a) may be supplied by, or with the authorisation of, the Secretary of State to an officer acting for the purposes of the Employment Agencies Act 1973 for any purpose relating to that Act; and
(b) may be used by an officer acting for the purposes of that Act for any purpose relating to that Act.
(2) In the Employment Agencies Act 1973 (c. 35), in section 9 (inspection), subsection (4) is amended as follows
(a) after this section there is inserted (or pursuant to section 15(5A) of the National Minimum Wage Act 1998);
(b) after paragraph (iv) there is inserted or
(v) to an officer acting for the purposes of the National Minimum Wage Act 1998 for any purpose relating to that Act;.[Mr. McFadden.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 1

Amendment of the National Minimum Wage Regulations 1999
(1) The National Minimum Wage Regulations 1999 are amended as follows.
(2) In Regulation 31, sub-paragraph (1)(e) leave out that is not paid through the payroll and insert whether paid through the payroll or by any other method..[John Hemming.]

Brought up, and read the First time.

John Hemming: I beg to move, That the clause be read a Second time.

Martin Caton: With this it will be convenient to discuss New clause 7National minimum wage: gratuities
In the National Minimum Wage Act 1998 (c. 39), in section (2) (determination of hourly rate of remuneration), after subsection (5) there is inserted
(5A) The regulations shall make provisions with respect to employees in service industries, to provide that gratuities paid to them in the course of their employment shall not be included in the calculation of the national minimum wage to be paid to them...

John Hemming: There has been some concern about this issue. New clause 7 would have similar effect to new clause 1, which is meant to probe the issue. Depending on the Governments response, however, we might be inclined to divide on new clause 7, if the hon. Member for Huntingdon wants to do so.
This issue is important because it is complicated to have a mix of service charges and extra bits on credit cards with some things being paid through the payroll and others not. Some subtlety is required to handle the matter. Perhaps there should be a standard service charge rather than it simply being put in the price, so that there is clarity. I am interested to hear what the Government have to say on that.

Stephen Crabb: It is a pleasure to serve under your chairmanship, Mr. Caton. Obviously, I rise to speak to the new clause tabled by my hon. Friend the Member for Huntingdon, but I support the sentiment in the new clause tabled by the Liberal Democrats.
At the start of the Committees proceedings on Tuesday, the Minister referred to an article that he had read in the Sunday Mirror purporting to convey some foresight into what might be a future Conservative Governments approach to the minimum wage. On behalf of the Conservatives, I should say that we are positive about the minimum wage. When discussing an amendment earlier this afternoon, my hon. Friend said that changes can occur in political parties. One change in our party is that we recognise that the minimum wage has been a good thing, and we want it to be properly enforced and to be effective.
We are also positive about the service industry. We recognise that we have a vibrant, successful service sector that is an increasingly important component of the economy, and we want that success to continue. Our new clause would support a successful and vibrant service-based economy, from the perspective of both employees and employers. From an employers perspective, our new clause would make a significant difference to many people working in cafÃ(c)s, restaurants or hairdressers. Let us take, for example, the case of a student working in a city centre restaurant, doing three shifts a week, six hours each shift, totalling 18 hours a week. That person might be paid the minimum wage rate of £5.73 an hour and can expect to take home £103.14. If they anticipate that they will receive £20 in tips per night, which is not unusual in a city centre restaurant, an extra £60 will bring their wage up to £163.14. By having a properly enforced minimum wage, £163 is far better than if they were receiving a wage below that level.
Let us compare that scenario to the one uncovered by The Independent on Sunday and reported on in May this year. It was about a leading Italian restaurant chain that employed its 300 members of staff at £3.75 an hour. There was a substantial difference in what those employees were taking home. The company said in its defence that it took care to maintain that the money that its employees received at the end of each week or month was equivalent to the minimum wage level, and that it bumped it up to ensure that its staff received at least the minimum wage. That defence was weak.
Many restaurant owners argue that that it creates an incentive for good performance on the part of their staff if they know that they need to work hard and put in a good performance just to bring their wage up to the minimum wage level. I do not buy that. A far more powerful incentive for employees in cafÃ(c)s, restaurants, hairdressersor whatever the service-based scenariois to be guaranteed a decent legal minimum wage at the end of each week, knowing that whatever tips, bonuses or gratuities they receive are in recognition of extra-good performance.
I am sure that I am not the only hon. Member who has experienced particularly bad service or an unhelpful, stroppy waiter or waitress, nor would I be the first to observe that we have a problem of patchy quality in our service sector. Guaranteeing a decent minimum wage for people in the service sector will help to raise their esteem and lead to overall gain for the industry and the British economy.

Hugo Swire: I support new clause 7, and I largely support what my hon. Friend the Member for Preseli Pembrokeshire has said, but I want it to go a lot further. It hinges on the word gratuitya tip. A gratuity is given to someone who has done something above what we would normally expect them to do for us. The whole issue of tipping is completely out of control in this country. I have never understood why a taxi driver who is rendering us a service when we contract him to take us from A to B expects a 10, 11 or 12 per cent. tip on top. Even when I was a little younger than I am now, taxi drivers used to emerge from the comfort and warmth of their front seats to open the door and help elderly people with suitcases. Alas, that is no longer the case, yet they still expect a tip on top of what we pay them. That is completely unacceptable.
I represent a constituency that has many people working in the service industry. The industry is casual and seasonable, and it pays a low wage. To them, the minimum wage is important. I would come down harder than my hon. Friend the Member for Preseli Pembrokeshire on the Italian restaurateur, or on any other restaurateur who acted in that way. There is evidence throughout the country of people regarding gratuities or tipping as a supplement with which to bring poor wages up to the minimum wage. Such a practice should be illegal, and it should be enshrined in law that it can never happen.

Stephen Crabb: For the sake of clarity, I too regard it as absolutely unacceptable for a chain of restaurants to use arguments about incentives as a smokescreen for paying an illegal wage to its workers.

Hugo Swire: Indeed. If I suggested that my hon. Friend did not feel as strongly about the matter as I do, I completely withdraw that remark.

Mary Creagh: I am sure that all members of the Committee feel strongly about it. Does the hon. Gentleman agree that we need to put an end to the practice whereby restaurants automatically add the service charge to a bill but leave the total blank so that people unwittingly add an extra amount? That is bad for consumers as well as for staff.

Hugo Swire: The hon. Lady is stealing my script. I completely agree with her. An hon. MemberI cannot remember whowas going to introduce a private Members Bill on the whole question of tipping, but alas he lost his seat or is otherwise no longer with us. I am quite tempted to do the same, although I do not want to lose my own seat. Nor do I wish to irritate the entire taxi-driving community of London, although I fear that I have already done so. I shall have to resort to my Vespa motorcycle, which I ride most days anyway like a good green Conservative.
The hon. Lady rightly raised another issue about gratuities and tipping in general. As well as the appalling practice whereby service is added on and then the bill is left open, when one asks whether service is included it can seem almost like a threat to be told, Yes, 12.5 per cent. or whatever, as if that is not enough. Where does that money go? Increasingly often, I ask waitresses and waiters, many of whom come from eastern Europe and many of whom are struggling students, what happens to their tips. When I hear that they are all pooled and handed out at the end of the week, I do not much like the sound of that either.

Martin Caton: Order. We are getting into the issue of tipping generally. It would be useful if the hon. Gentleman could bring the debate back to its relationship with the national minimum wage.

Hugo Swire: Indeed. I shall therefore call them gratuities.

John Hemming: Does the hon. Gentleman agree that bringing in such a change would make a distinction between the service charge, which is really a way of hiding part of the price of the food, and a gratuity, which is a bonus for extra work?

Hugo Swire: Absolutely right. A gratuity is a gratuity. As I said, it should reward service that is way and above that which one would normally expect to receive.

Brian Binley: I am getting a little concerned about the anti-business attitude in all this, and I want to defend the people who act properly with their staff. Many of those who levy a service charge, whether or not my hon. Friend agrees with that, act properly towards their staff and ensure that they receive it. There is a difference between a service charge, which embraces the whole of the operation, and a gratuity to a given waiter or waitress. We have to be careful that we are not seen as being seen as anti-business.

Hugo Swire: I do not agree with my hon. Friend. I have never understood why one needs to pay any kind of charge to sit at a table in a restaurant when one is going to pay for ones food. A gratuity is for service, and it should go to the person who is serving. That is why I increasingly pay in cash at the end of my meal to ensure that it goes to the waiter serving me and is not used by the proprietor to get that person up to the level of the minimum wage.

Stephen Crabb: Does my hon. Friend agree that if people go into restaurants feeling compelled to tip merely to ensure that whoever serves them, whether they perform well or badly, receives a legal wage at the end of the week, that dilutes the potency of a well run system of gratuities? At the end of each night or each week, an employer should have an idea of which staff are receiving large gratuities or tips and which are not. That sends a good economic signal to him about how well his staff and his business overall are doing, and it is therefore pro-business.

Hugo Swire: I agree. I do not believe that any well run businessI have many in my constituency and there are many up and down the countryshould have to resort to any underhand way of paying their staff through the gratuities left by their customers. That is not anti-businessit is pro-employee and pro-well run businesses.

John Hemming: I therefore assume that the hon. Gentleman would agree that suggesting to businesses that they make it clear what the price list on the menu means is not anti-business but good for business because it provides clarity.

Hugo Swire: I agree. We are very dependent on tourists in the south-westwe have 15 million of them. No doubt many more would come if the trade unions did not ban them from trade union homes in the south-west, but we have to overcome that. Of course we want tourists, not all of whom are English or speak English as their first language. They might come to London, or wherever, and not understand about service charges and whether they have to tip. It is a complete mess. In no sense is this proposal anti-businessit is pro-business and good for well run businesses. Gratuities should not be used as a supplement in order to pay the minimum wage.

Patrick McFadden: The new clauses cover an issue that we all care about and which has come into increasing prominence over the last couple of years. The minimum wage, which we have discussed during consideration of the Bill, has evolved over time. For example, the situation for 16 and 17-year-olds was changed a few years ago. We have discussed changes with regard to voluntary workers and expenses, and the law has changed with regard to work experience and so on.
This is one such change, and it is something that I have wanted do since I became employment relations Minister. In July, I was pleased to announce that the Government would change the law to ensure that tips could no longer count to make up the minimum wage. That is profoundly within the instincts of the British people, and I was glad to make that announcement.
When we leave a tip in a restaurant, however it is divided among the staffI might come on to thatwe expect that it will be additional to the minimum wage and will go to the staff who served us, on top of their pay. It should not be used to make up the minimum wage.
The hon. Member for Preseli Pembrokeshire said that some businesses operate a system in which they guarantee the minimum wage, although some of it will be made up from tips. At the moment, that is not illegal if the tips or gratuities are processed through the payroll. Things partly depend on that. The change would ensure that all tips were additional to pay. We have announced that, and we believe it is the right thing to do.
Under the law, all workers are entitled to the minimum wage. The measure will deal with the situation raised by the hon. Gentleman so that the practice of using tips to make up the minimum wage will no longer be possible. That is why we announced the change several months ago.
There is a question about what happens to tips. It is more difficult to legislate on that, but we would all like to achieve transparency. In the end, the money is ours as customersas the hon. Gentleman said, we can choose to leave or not leave a tip, or to leave a smaller one should we wish. We must work with the hospitality industry to promote transparency over what happens to tips. That is equally as important as changing the law to ensure that tips are additional to the minimum wage.

Hugo Swire: I risk your wrath, Mr. Caton, but I agree with what the Minister says. I am sure that he and all members of the Committee can give examples of when, after an indifferent meal, they did not seek to reward that indifference, although they wanted to reward the waiter who provided first-class service.

Patrick McFadden: That is a fair point. For the purposes of the Government and the law, the critical point is that in future tips should be in addition to the minimum wage. As customers, we expect that to happen with our tips. I have not carried out a scientific poll, but I suspect that most customers would not like to think that their tips were making up the minimum wage.

John Hemming: How is this going to be implemented in law?

Patrick McFadden: The hon. Gentleman is anticipating me. I have explained how the regulations work at the moment: a service charge, tip, gratuity or cover charge that is paid to the worker through the payroll may, legally, count towards payment or part-payment of the minimum wage. We are seeking to address that issue.
At the end of July, we announced our intentions, and I am pleased to tell the Committee that my Department is preparing a consultation document, which we shall publish in a matter of weeks. We shall consult the hospitality industry on precise implementation. We have heard various comments today about service charges, gratuities, tips and so onit is true that there are all those different practices. When making such a change, it is right to consult the industry.
I also pay tribute to the people who campaigned for the change. The campaign has increased substantially over the past couple of years. We have heard a lot of talk about trade unions in our deliberations. I do not want to go over all that again, but a number of unions campaigned on the issue and, in doing so, were campaigning for something very much in line with public instincts. Our intention is to consult on exactly how to do this, but let me leave no doubt about the Governments intentions to do it, which will be made clear in a document in the next few weeks.
As for the amendments, we do not need to make the change through primary legislation. We can do it through the minimum wage regulations, which are debated in the House every year. We have a route forward, having consulted with the industry. There is substantial unity in Committeeacross all three partiesthat the issue is one that we want to address. As I said, the Government have announced a firm intention to do so. There is no need to do anything through the Bill or primary legislation. Fairness on tips unites us. On that basis, I hope we can move forward.

John Hemming: Obviously the issue can be dealt with through secondary legislation. Therefore, there is an argument for new clause 1 to be withdrawn, but new clause 7 would create a duty on the Government to act as they intend, which, perhaps, would give legislative cover. That would not be subject to judicial review, which secondary legislation can be. On new clause 1, however, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 2

Enforcement of unpaid Employment Tribunal awards
(1) The Secretary of State shall by order make regulations to enforce the recovery, on behalf of the claimant, of any Employment Tribunal monetary award not fully paid by the respondent within forty-two days of the date on which judgment was sent to the parties, and for the recovery of all associated enforcement costs from the respondent.
(2) Regulations made under subsection (1) shall
(a) identify organisations responsible for the recovery of awards under subsection (1),
(b) provide powers enabling organisations identified under paragraph (a) to recover awards and associated costs as set out in subsection (1),
(c) provide for the regulation of organisations operating under this section.
(3) Regulations under subsection (1) shall be made by statutory instrument.
(4) No regulations may be made under subsection (1) unless a draft of the instrument containing the regulations has been laid before and approved by a resolution of, each House of Parliament..[John Hemming.]

Brought up, and read the First time.

John Hemming: I beg to move, That the clause be read a Second time.
Unless we get a more substantive response from the Government, the new clause is a key issue that will require a Division of the Committee.
In essence, the new clause looks at what would happen if someone did not pay the employment tribunal award. As it stands, there would then be a civil enforcement process. We will come to the fact that equality of arms is the key issue. A lot of the people who are trying to get money that has not been paid to them are in a challenging position, having to go to a civil court and go through that process. The new clause would put a duty on the Government to produce secondary legislation. We are not trying to specify in minute detail how that should be doneI would not be surprised if this proposal had been drafted by Citizens Advice, but I am not 100 per cent. certain, not having been involved at that stage.
People should recognise that there is a real problem here. The Government need to act. This is the right vehicle to create regulations enabling the enforcement process to be handled, so I would like to press new clause 2 to a vote, unless the Government pull some legislative rabbit out of the hat.

Jonathan Djanogly: I put my name to the new clause on a probing basis, because important questions raised in the other place have not yet been answered. The Government say that they recognise that there is a need to address the recovery of awards, but they do not believe that direct enforcement is the way to deal with such claims. Will the Minister tell us what form enforcement should take instead?
The new clause deals with a problem that is often faced by those at the poorer end of the employment spectrum. It was originally tabled in the other place by Baroness Turner at the request of Citizens Advice, with the aim of dealing with the problem of non-payment of employment tribunal awards by rogue employers.
The current system is long and complex, and sometimes prohibitively expensive for those who have not been paid their award. There are, on average, some 15,000 employment tribunal awards made in favour of claimants each year, but Citizens Advice estimates that more than one in 10 does not receive their award. Citizens advice bureaux dealt with more than 1,000 cases last year alone, and Citizens Advice research also highlights the fact that nearly half those unpaid awards were for less than £2,000 and almost a quarter were for less than £1,000.
For those vulnerable workers affected, navigating the county court or High Court enforcement process can be a daunting challenge that involves a lot of time, stress and cost relative to the value of the award. Citizens Advice notes that many of those affected simply do not take their claims forward, that the impact on them can be devastating and that the total loss involved may be as much as £7 million per year. Rogue employers knowledge of the complexity of enforcement provisions means that they could see it as a commercial decision to avoid paying out, because, on balance, they might save more than they would be forced to pay out in the longer term.
The Government have said that they commissioned their own inquiry on this area, on the back of Citizens Advice. Will the Minister tell us what format the inquiry has taken and what results it has produced to date, bearing it in mind that the inquiry has been running at least from May?
There is a wrong here that needs to be recognised. I am interested to hear the Ministers reaction to the question whether the new clause is the right way to go about that.

Michael Jabez Foster: I would like to know what the problem is. At present, this is a straightforward issue of the judgmentthe awardbeing registered in the county court and then enforced. There are problems with county court enforcements: often the employer does not have the money; it is a matter of the resources not being there. I cannot see how a new systema new bureaucracy of enforcementwould help.
I want to discover how this new organisation would operate under the new clause. How would it differ from the current, relatively simple process of attaching an affidavit to the award and registering it in the county court? That is all that happens at the moment. Then there is the enforcement problem to consider. Is it being suggested that the rules under the new clause should be enforced in respect of criminal proceedings, such as an award in a magistrates court? What is the logic behind the new clause that would make its new methods of enforcement different from those now available in the county court?

Patrick McFadden: I am grateful to my hon. Friend for raising that important and valid issue. It has been raised a number of times with me by Citizens Advice, which has campaigned long and hard on it, and is campaigning for proper enforcement of tribunal awards. This is about not an extension of the law, but its enforcement.
In July, I met representatives of Citizens Advice with the Under-Secretary of State for Justice, my hon. Friend the Member for Lewisham, East (Bridget Prentice), to discuss the matter. I put on record my thanks to my hon. Friend for taking the matter so seriously, particularly in recent months as we have been discussing it with Citizens Advice.
As the hon. Member for Huntingdon said, the new clause follows on from a similar one tabled in the other place during earlier stages of consideration of the Bill. It would allow the Secretary of State to provide by regulation for an organisation or organisations to enforce employment tribunal decisions that remained unpaid on the due date, which is normally 42 days after judgment on behalf of the claimant.
As Lord Bach said in the other place, the Government recognise the need to do more. He laid out some steps that are being taken by the Ministry of Justice, which has responsibility for the issue. I will recap those briefly. First, there are measures in the Tribunals, Courts and Enforcement Act 2007 that, when implemented in the secondary legislation to which the hon. Member for Birmingham, Yardley referred, will allow unpaid awards and legally binding agreements brokered by ACAS to be automatically registered as country court orders so that the full range of enforcement options can be pursued.
Importantly, unpaid awards will be included on the register of judgments, orders and fines, which is often consulted by banks and credit companies when considering applications for credit. The Ministry of Justice is working to introduce those measures by April next year, which is the same date as the implementation date for the changes to the dispute resolution system which we have been discussing.
Secondly, the Ministry of Justice is undertaking research to explore the extent of non-payment. I appreciate that there has been research by Citizens Advice, which has been referred to, but the Government are carrying out research on the issue. The hon. Member for Huntingdon asked about the dates for that research. It started on 8 September and will report by 26 November. Citizens Advice has helpfully published its own research, which will contribute to that work. Taken together, the two studies will provide detailed evidence of the extent to which employment tribunal awards remain unpaid. That will give the Ministry of Justice a firm basis for considering what further steps are appropriate, bearing in mind the changes in the 2007 Act.
I have met Citizens Advice to discuss the issue and I understand the difficulty for vulnerable workers. It is important that the Committee is aware that there is an exemption from court fees for claimants in receipt of income support and the other key means-tested benefits, and for those whose annual income is below a certain threshold. That includes fees for enforcement directly through the county courts, but not for enforcement by High Court enforcement officers.
I am pleased to say that the Ministry of Justice is committed to continuing to work with Citizens Advice to review and approve where possible the process for the enforcement of awards. One option that will be discussed is the Citizens Advice proposal for High Court enforcement officers in this area. Ministry of Justice officials are already in touch with Citizens Advice on the matter.
In summary, I believe that this is a valid issue to raise. We all want people who win their case at tribunal to get the award to which they are entitled. I take this matter seriously. I assure the Committee that the Ministry of Justice also takes it seriously. We will maintain a dialogue with Citizens Advice on it. I do not think we can say at this stage whether the method proposed in the new clause is the right one. However, I accept the validity of the issue and guarantee that we will maintain a dialogue with Citizens Advice.

John Hemming: I understand from the Ministers response that there is automatic registration of judgments for ACAS agreements but not for tribunal agreements. One would presume that the objective is to ensure the automatic registration of judgments from the tribunal in the county court. That could be done by the employment tribunal service itself.

Patrick McFadden: I think I am right in saying that that does include the automatic registration of tribunal judgments. When I mentioned ACAS-brokered agreements, I did not mean that only those were registered and not employment tribunal judgments.

John Hemming: On that basis, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 4

Fair Employment Commission
(1) The Secretary of State shall appoint a body, to be known as the Fair Employment Commission, to discharge the functions conferred or imposed on the Fair Employment Commission under this section.
(2) The Secretary of State may refer the matters specified in subsection (3) to the Commission for their consideration.
(3) Those matters are
(a) the operation of the National Minimum Wage Act 1998;
(b) the operation of the Employment Agencies Act 1973;
(c) the operation of the Health and Safety at Work Act 1974;
(d) the operation of the Gangmasters (Licensing) Act 2004; and
(e) such matters relating to this Act as the Secretary of State thinks fit.
(4) In considering the matters specified in subsection (3) the Commission may carry out such inspections of workplaces as it considers necessary.
(5) Where matters are referred to the Commission under subsection (3) above, the Commission shall, after considering those matters, make a report to the Secretary of State which shall contain the Commissions recommendations about each of those matters..[John Hemming.]

Brought up, and read the First time.

John Hemming: I beg to move, That the clause be read a Second time.
This is another probing provision, which looks at having a body where the various stakeholdersas is now the phrasecan argue their case so that the law can be kept in view. I am interested in hearing the Ministers views on that.

Jonathan Djanogly: The hon. Gentleman said that this was a probing provision. I have two concerns about it. First, the emphasis once again seems to be on a new body to deal with problems of enforcement, and I fear that that might create undue costs for not enough benefit. The Bill already contains provisions to strengthen the investigative powers of the employment agency standards inspectorate in enforcing the Employment Agencies Act 1973 and related regulations, including powers to allow EAS inspectors to demand and secure copies of financial information from an agency or suspect directly, or from their bank or building society. I suggest that we give some time at least for those provisions to bed in and take effect, and that we then review the effectiveness of what we have done in this Bill, rather than too quickly forming a new body with sweeping powers of investigation.
My second concern is that a balance must be maintained between the freedom of business to go unhindered by arbitrary state intervention and that of the individual to fully enjoy the rights afforded to him by law. I am concerned that such a balance is not achieved by the new clause, and that we would simply be creating another body and yet more red tape.

Patrick McFadden: The idea of a fair employment commission was suggested in a report published by the TUC earlier this year. It had established a body called the commission on vulnerable employment, which looked into this whole area, and that idea was one of its recommendations. The issue is what we mean by such a body, and whether we mean the combination of all the agencies covered by new clause 4. The issue of the closer co-ordination of the enforcement agencies has been raised with the Government. I am certainly committed to such co-ordination; it is in the interests of vulnerable workers, reputable business and the taxpayer. The question is whether we need to bring all the agencies together in one body. I am not sure that that would be the most effective way to proceed.
What the Government have agreed to do is to set up a boardthe fair employment enforcement boardwhich will bring together all the agencies to ensure that they can co-ordinate their work and that we get the best value for money from the taxpayer, and also to deal with some of the silo issues that we have discussed. Representatives of the TUC, the CBI and the Federation of Small Businesses will also be on the board, because it is important that we hear the views of both employees and business as we discuss enforcement. My experience is that when it comes to proper enforcement, the CBI and the TUC often agreethey both have a great interest in strong and effective enforcement.
The boards work will focus on helping vulnerable workers and their employers by improving enforcement, raising awareness of employment rights, and so on. The board will meet for the first time next month, and its key focus will be to oversee delivery of the key measures in the vulnerable workers forum report, which was published a few months ago. Those measures include the development of plans to pilot a single enforcement helpline and a review of the strategies for taking forward a sustained campaign to raise awareness of basic rights and to encourage reporting of abuses. I am all for closer co-ordination but I am not sure that it is necessary to have a single enforcement body as the clause implies. Putting that together could absorb a great deal of institutional energy rather than doing the job for which the enforcement bodies were set up. That will be what the new board tries to take forward rather than the picture painted in the new clause. This is again about transferring more of the burden for navigating the system from the vulnerable workers themselves to the Government.
I appreciate where the hon. Member for Birmingham, Yardley is coming from, but closer co-ordination, better working together and better value for money are probably a better route than full merger or the creation of a single commission. We have gone some way towards achieving that and I hope that it will be effective.

John Hemming: I am slightly surprised by the hon. Member for Huntingdon wanting to maintain four quangos when we are suggesting having only one, but if the Conservatives now want to increase the number of quangos, that is their choice.
It is quite clear that the direction of travel is towards greater co-ordination and I would not be surprised, from what the Minister is saying, if that is the result after time. I see no merit in dividing the Committee on this. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 5

Employment tribunals: costs
In the Employment Tribunals Act 1996 (c. 17) in section 13 (costs and expenses), after subsection (2) there is inserted
(3) The losing party in any proceedings before an employment tribunal shall bear the costs of the winning party.
(4) Up to 25 per cent. of any claim can be awarded to the defendant as a penalty on the claimant in the event that the claimants action is deemed vexatious...[Mr. Djanogly.]

Brought up, and read the First time.

Jonathan Djanogly: I beg to move, That the clause be read a Second time.
We now go back to the first part of this Bill, dealing with employment tribunals. At the start we discussed the procedure of employment tribunals and penalties for non-compliance. I said at the time that it was difficult to have that debate without discussing vexatious claims, not least because we did not have the facts and statistics to make a decision in relation to the procedural aspects, but also because vexatious claims are of most concern to employers. Now we can have that debate in an area where there are more statistics on vexatious claims.
The new clause has two proposed subsections, the first stating that
The losing party in any proceedings before an employment tribunal should bear the costs of the winning party.
Since 1999, on average 111,754 claims have been accepted every year by employment tribunals, of which only 15 per cent. are successful; 66 per cent. are withdrawn or settled; and 19 per cent.some 21,233are dismissed or unsuccessful. Given that the estimated average cost to employers of defending a tribunal case is about £9,000 and almost 10 days of lost time, it is unsurprising that the CBI reports that a quarter of cases are settled by employers, despite receiving advice that they are likely to win. This pattern is especially true for small and medium-sized companies that are less likely to have internal resources or legal advisers to fight claims on their behalf.
There is another recurring pattern with small businesses, in that tribunal applications are disproportionately high in small employers, particularly those employing between 50 and 249 employees215 applicants came from a group of employees that employ only 4 per cent. of the work force. Taken together, those businesses that employ fewer than 250 people are respondents in 62 per cent. of cases but employ only 37 per cent. of the labour force.
Business organisations report that there is a culture of settling cases to get rid of them, which is encouraged by the fact that costs are rarely awarded against litigants, and complainants may have relatively few costs of their own. Employers believe that cases are pursued using no-win, no-fee lawyers in the expectation that businesses will settle a claim at a level below what they believe it would cost to defend it at hearing.
Take, for instance, the case of the Law Society in 2001, when it ran up costs of more than £1 million defending itself against claims of race and sex discrimination made by its former vice-president, who had previously been forced to resign after allegations that she herself had bullied and harassed staff. Despite finding that the claimant had indeed created an atmosphere of fear and dread, and that she had also lied under oath, a tribunal found in her favour after a six-week trial.
The Employment Tribunal Service reported in 2003-04 that 976 awards of costs had been made34 per cent. to claimants and 66 per cent. to respondentsout of 30,107 claims that went to a hearing, the average order being £1,859. By 2006-07, that figure had shifted with 509 cost orders being made: 32 per cent. to claimants and 68 per cent. to respondents. The average award was £2,078, but the maximum was £65,000. That means that costs were awarded to employers in fewer than 0.3 per cent. of all cases, with the majority getting less than £1,000. To compound this, the number of cases accepted by employment tribunals has gone up since 2004-05 from 86,000 to 132,000 in 2006-07, an increase of 53 per cent.
The Employment Tribunals (Constitution and Rules of Procedure) Regulations 2001 introduced changes to the employment tribunals rules, including an increase in the maximum amount of unassessed costs that tribunals could award from £500 to £10,000, and the power to make an order for costs in cases where a claim had been misconceived. Rules 39 and 40 set out when an award of costs must and may be made respectively. Employment tribunals must make an award only where a hearing is postponed because a business fails to adduce reasonable evidence as to the availability of the job, or a comparable one, from which the claimant was dismissed or, alternatively, if the claimant informs the respondent business at least seven days before the hearing that they seek re-engagement. This is a provision that will hardly set the mind of small businesses at ease when they consider the cost of defending themselves.
Rule 40 allows employment tribunals to make cost awards where claimants have brought proceedings and have
acted vexatiously, abusively, disruptively, or otherwise unreasonably, or that the bringing or conducting of proceedings has been misconceived.
If that is the case, the employment tribunal must then consider whether it should exercise its discretion to make a costs order. Employment tribunals have been held to have acted erroneously in three cases, because after finding that the case fell in to one of the headings in rule 40(2) they did not then separately consider whether they should exercise their discretion to make a costs award.
The discretion to make such awards in favour of businesses is hampered by this dual procedural hurdle. Can the Minister tell the Committee how often cost orders are made under this provision? The scope of these powers when combined with statistics that I outlined earlier makes me deeply suspicious that employment tribunals are ruling against awarding costs to companies in a disproportionately high number of cases. While I accept that a few small businesses may employ sharp practice and deserve to be brought to book, it is the widespread belief of business in the UK that the tribunals have a predisposition towards claimants and that in any event the system is such that companies are being forced to settle because of the costs of the system.
The Bill seems to be saying that dealing with the procedural issues will solve the problem, which is not at all the case. To that end, my amendment seeks to redress the balance and ensure that businesses are not penalised disproportionately by employment tribunals into paying the costs of claimants. The second part of new clause 5 suggests that up to 25 per cent. of any claim can be awarded to the defendant as a penalty on the claimant in the event that the claimants action is deemed vexatious.
The rise in employment claims since 2000 has been almost unstoppable on the back a compensation culture that is spiralling out of control, according to the CBI deputy director-general. He said:
I visited a company where they had a security camera showing an employee leaving his shift, getting on his bike and falling off outside the factory gates. What he did then was to get up, get on his bike, come back into the companys gates and fall off again.
In 2004 the CBI employers association said that 69 per cent. of firms thought more employees were bringing weak and vexatious claims. The CBI now reports that 44 per cent. of respondents to its CBI/Pertemps employment trends survey 2008 felt that weak and vexatious claims have increased over the past year. It goes on to point out that employers believe that far too many weak claims proceed through to tribunal as some tribunal offices are reluctant to use the powers available to them. It is felt that this is an issue of resources, as the existing powers could be used more effectively and consistently with better filtering of claims during the stage at which they are issued to tribunal.
In recent weeks, I have spoken to various organisations that have raised concerns about the record of employment tribunals, especially in relation to vexatious litigants and the cost of proceedings being disproportionately heavy on small businesses. We must appreciate that we are not talking about large outfits with big human resources departments. Often, those operating small businesses with one or two employees are no more sophisticated than the employees who are bringing the claims.
The Department of Trade and Industrys Survey of Employment Tribunal Applications in 2003 estimated the cost of employment tribunal proceedings to business as £4,362 per business. That does not include the main cost: that of time. On average, about 9.8 days were spent on a claim, 7.7 days of which were the time of directors or senior managers. Further figures for 2005-06 estimated that the average cost to the Exchequer of each claim was £606. Given those figures, the cost for the 19 per cent. of dismissed or unsuccessful cases is about £93 million for employers and £12 million for the Exchequer. Can the Minister give us the preliminary figures for this year?
While I accept that not all dismissed cases are vexatious, a considerable proportion are. An example is the employee who was caught dealing cannabis at work and admitted that he had been doing so for some time. He was dismissed, but claimed unfair dismissal and his notice money. The case went to a hearing but he did not turn up. Nevertheless, the companys representatives were made to go through the evidence to get the case rejected. Another example is the case of an accountant who claimed under disability discrimination law for a disability of acute anxiety about her work performance, which prevented her from working to deadlines or submitting herself to appraisal. She argued that her employer had not sufficiently adjusted her working conditions to take account of that. At lunch time during the tribunal hearing she disappeared. The case was abandoned, leaving the employer with substantial, irrecoverable legal costs.
Rule 18(8) of the employment tribunal rules, which are set out in schedule 1 to the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004, enables an employment tribunal to strike out a claim. There are provisions for deposits to be paid and for restriction of proceedings orders to be made against vexatious claimants. It seems strange that the Government have been looking to amend employment tribunal powers when the current rules are so clearly underused. Should they not instead insist that tribunals use those powers more effectively? Many businesses, along with my party, believe that this issue must be dealt with. How does the Minister intend to get tribunals to work more fairly against vexatious claimants and prevent more from trying it on in the future?
The new clause is designed to ensure that vexatious claimants are penalised for wasting the time of the employment tribunal and, more importantly, the employer. I have already noted that the cost to business is in excess of £93 million each year and to the Exchequer, £12 million. Is it not about time that those who cause that out-of-pocket expense start helping towards its repayment?

Michael Jabez Foster: From experience, I take issue with the hon. Gentlemans claim that the majority of claimants who fail are vexatious. That is not the case. The majority who fail misunderstand the situation. Some are vexatious, but as he rightly points out, the rules already exist. For many reasons, I strongly oppose cost orders being made against every losing litigant, which is what he is calling for.
Let us be clear: tribunals are not courts of law. They may be becoming so and that is unfortunate. The purpose of the tribunal system was that a layman could go along and do his stuff. He could explain what happened and the tribunal chair or others would assist. If anything is to be done, and if I were advising the Minister, I would suggest throwing away the tribunal rules and starting again.
The process has become far too complex and that is why it has become so costly. The figures given by the hon. Gentleman for the average cost of proceedings are probably about right because of the complexities. Every time that the rules are changed, they become more complex, more difficult and simply not understandable to the average litigant. For that reason, claims are often brought not because of vexatious behaviour, but because people do not understand the situation properly. That would be my plea. To penalise someone who believes that they have a reasonable claim, of whatever nature, seems to be wrong in principle. It would deter people who had genuine grievances.
I am sympathetic to the small employer, and I realise that requirements create a great burden. In the main part, most or many of them are insured, but when that is not the case, it can be a problem. However, the litigant or applicant, who may have lost a job through unfair dismissal, will not have any resources, unless they can persuade the citizens advice bureau to take on the case for them. Incidentally, yesterday I wrongly took the lead from an Opposition Member in saying that citizens advice bureaux do not assist employers. Citizens Advice has written to me today to say that it is very happy to help small employers, as well as employees, in seeking legal advice.
I very much hope that the Minister will reject the proposal in all cases, although I agree that, where there is genuine vexatious conduct by either party, it should be properly penalised.

John Hemming: I echo the substance of what the hon. Gentleman just said. When a lay person, who is on a low income and has not been paid their wages, comes to a process, we do not want him to be frightened by potential costs incurred on the other side. That does not mean that costs should never be awarded, but perhaps we should, in looking at this, take a lesson from the small claims court. It could be argued that, if someone has initiated a claim at a lesser level, he should feel invulnerable from costs, but at greater levels the issue becomes much more complex.
One of the things that substantially changed the nature of employment tribunals was when the maximum was increased from £12,000. I do not think that anyone is suggesting that we go back to that, but it did mean that that was the maximum cost that anyone incurred. The question that has to be asked is whether we should look at this from the point of view of costs and the magnitude of the initial claim. If the magnitude of the initial claim is not that great, it allows people to make a commercial decision to concede the claim, rather than to fight it, which is not necessarily ideal. Obviously, the Governments proposals to try and resolve things before they go to tribunal is definitely a good one, but we would oppose introducing a general costs awarded every time approach.

Brian Binley: I welcome the Governments proposals to deal with most of these matters at an earlier stage. That is absolutely right and proper.
We have, in part, created a blackmail culture. I shall explain what I mean by that from personal experience. I have had the sad opportunity of handling two industrial tribunals, both of which we won. In both of them, the company that I had started was told that it was not at fault and the recipients used lawyers provided by the citizens advice bureau, although I am not saying that that should stop. In fact, we talked to the citizens advice bureau. It was not very helpful. It felt, frankly, that, as a business with 30 or 40 people, we were quite capable of standing on our own. However, businesses that I classify as small, developing ones, do not have human resources departments, and that is where the problems fall hardest in many respects. I agree that, for very small businesses, the citizens advice bureau is very helpful, but, with those bigger businesses, there is a sort of cultural view that they ought to be able to look after themselves.
We were advised by many other business people to pay £2,000 and not to bother with the tribunal, even though I was adamant that we were right and had acted correctly. I felt that that particular blackmail culture was unacceptable. Frankly, it is bad for our commercial and industrial processes. I disregarded the advice, and we went ahead and fought. I am glad that I did, because we won on both occasions. However, we added up the costs of the preparation and of appearing at the tribunal for two days with three witnesses who had to be there on each occasion. The first one cost us £9,000, the second one £14,000. That was a heavy blow to a business in which cash flow was vital; we were not cash-rich, my house was backing the process and we were struggling to grow, which we successfully did.
We need to take note of two elements when considering the provision. The first is the blackmail culture. Do not get me wrong, I am not saying that everybody who goes to an industrial tribunal is a potential blackmailer. That is not the point. Many people have genuine cases and we should recognise that. I am not arguing that all the employers are good and all employees are bad; that is far from the truth. However, we need to recognise the blackmail culture among certain groups of people, and take it into account.
The second element to consider is that costs were not awarded to us. On both occasions, the whole exercise was a sizable demand on our cash flow, and the news that we had spent all that money was not well received by the bank. I got the impression that it may have thought that we should have paid £2,000 and not bothered with the tribunal.
I know that the Minister does not want to want to generate that culture, but I ask him to take that atmosphere into account. I will support the new clause. I do not know whether the wording is correct. I do not know whether there are other ways of doing it. However, I do know that there is a problem, and we need to deal with it more effectively than we are at the moment, hence my support.

Nick Palmer: If there is a problem with tribunals being too generous to applicants, that should be addressed by looking at the way in which they reach their conclusions rather than by a financial penalty. The idea that 19 per cent. of applicants could be faced with a bill of, on average, £9,000 when they have just been dismissed is, frankly, terrifying. It is unprecedented in civil law for one to face the prospect of being automatically landed with a huge legal bill if one loses, without the court having any discretion over that. Whether we intend it to or not, that will have an extremely intimidatory effect. I urge hon. Members to reconsider the new clause.

Patrick McFadden: What strikes me about the new clause is that it seeks to reform the current situation rather than the situation that the Bill will create. The thrust of the part of the Bill that deals with dispute resolution is based on a recognition that it has become overly legalistic and over-costly. The figure of £9,000 per case is accurate, as far as I am aware. I agree with my hon. Friend the Member for Hastings and Rye when he says that there may have been a trend for it to become more legalistic. That was not the original intention of the tribunal system, but in some ways that has been the case. However, it is certainly not universal; there are still plenty of circumstances where people are unrepresented and argue their own cases.
The clauses that we discussed earlier in our proceedings about earlier dispute resolution, about removing the three-step procedures introduced a few years ago and about increasing the role of ACAS, with Government funding of up to £37 million over the next few years and the lifting of the time limits on its interventions, will all have an impact. The Governments impact assessment says that this Bill and those measures could save business up to £170 million or more.

Jonathan Djanogly: Will the Minister set out how those measures will have an impact on dealing with vexatious claims?

Patrick McFadden: There will be a greater opportunity to resolve claims earlier. My problem with the new clause is that it strikes at an access-to-justice point. It has been a long-standing belief of this Government and previous Governments that individuals should have the ability to enforce their rights through a system that provides access to justice for all, regardless of status or background. The tribunal system provides this access to justice, in part through the principle thatother than in limited circumstances, which I will come toparties are responsible for their own costs. In this way, those without the resources to afford costly legal representation can still try to take action to enforce their rights.
As has been commented on by my hon. Friends the Members for Broxtowe and for Hastings and Rye, were we to abide by the new clause and award costs automatically against the losing party, that would not only set employment tribunals apart from other tribunals where such general powers do not exist; more importantly, it could seriously deter individuals from bringing claims to tribunal when they may have a good case, for fear of being left with a very large bill if they are unsuccessful. We must also consider how such a proposal would have a disproportionate effect on people. The introduction of costs against the unsuccessful party automatically is more likely to deter claimants from pursuing action, rather than respondents.
I accept the point made about small businesses not always having the greatest resources. That is why the other measures in the Bill will be of significant help to small businesses and address this situation. However, if there was an automatic award of costs against a losing party, employers could use that possibility as a tool to dissuade employees from bringing a claim in the first place. There is an important access-to-justice argument here.
The hon. Member for Huntingdon asked me about vexatious claims. There are measures in place to deal with those. There are already pre-tribunal hearings where claims can be struck out, which happens in about 2 per cent. of cases. One could argue that the 2 per cent. figure means that there are fewer vexatious claims than we think, because the tribunals are looking at them and striking that percentage out. Alternatively, one could take the view that they should be striking out more, but there is a process in place for striking out such claims.

Brian Binley: Does the Minister recognise that a lot of these claims do not even get to first base because it is felt that it is easier and cheaper to pay a small amount of money out, rather than face the problems of a tribunal and the whole ACAS process? Does the Minister agree that that is an injustice, as well?

Patrick McFadden: I am not sure about the point that the hon. Gentleman makes. The point that I am trying to make is that there is a process in place to strike down vexatious claims before they get further on in the procedure. There is also a process whereby a deposit of £500 can be charged if the case is judged to be weak at first glance, and costs awarded. In 2006-07, 343 cost awards were made, so it does happen in some cases.

Michael Jabez Foster: Is the problem not that for some small businesses, the fear of an order for costs against them would create an incentive to settle unnecessarily, because they would be fearful of substantial costs as well as the award?

Patrick McFadden: That is a valid point. As I said, I agree with the hon. Member for Northampton, South when he reminds usas he has done several timesthat the resources available to small businesses in terms of time, human resources and money are limited. That is why the overall dispute resolution reforms in the Bill are important and advantageous to business.

John Hemming: Will the Minister look at the issue of a small claims track? The costs need not be so great, because people know that if they lose, they will not lose that much and they can do it for themselves.

Patrick McFadden: I think that the reference was to caps on awards, and that is a more complicated picture. Costs of up to £10,000 can be awarded if the judge or tribunal believe that the claimant or representative has acted vexatiously. The new clause on vexatious claims mentions a 25 per cent. variation, but putting a value on a vexatious claim is difficultby its nature it is worthless, so how can we value it? Not every claim will have a cost value. I imagine that the 25 per cent. figure relates to the fact that earlier, we talked about varying the awards up or down by 25 per cent. However, that is for when we have an award. At this early stage we do not have an award, so concluding what 25 per cent. might be would be difficult in practice. There is no requirement for claimants to give a statement of loss on their claim form. If one is given, it is often judged not to be realistic. For example, some discrimination claims have no value placed upon them; it is simply alleged that the claimant has been discriminated against.

Jonathan Djanogly: The figure is 25 per cent. of any claim, rather than 25 per cent. of any award.

Patrick McFadden: That is my point. I did mention that that there was no requirement for claimants to put a value on their claims. It is difficult to say what there should be 25 per cent. of, and that makes the measure difficult to implement in practice, were we to choose to do so.
I acknowledge that there are probably vexatious claims in the system, and it is important to have a process to deal with them. We have a pre-tribunal hearing process in place and if we can improve that, we should. It would be an errorquite an important onefor us to agree to a wholesale change in the way that the tribunal system has operated for years under the governance of both parties, when the principle has been for people to bear their own costs. It is possible to award costs in some cases, but making that automatic would have implications for access to justice. That would be wrong and would not take into account the other changes that we make to dispute resolution. I therefore ask my colleagues to oppose the new clause.

Jonathan Djanogly: As my hon. Friend the Member for Northampton, South said, the number of cases grows more significant. The number of vexatious cases is risingof course, not all claims are vexatious and I am sorry if I gave that impression during my earlier remarks. As the Minister rightly said, there are powers to make cost orders and to have deposits paid, but in reality the tribunals do not use those powers to the extent that they should. The Minister says that his reforms will clear up the problem. If they work, they may simplify the system and hopefully that will reduce the level of cost. However, I do not see how they will stop the vexatious claimant. This is a huge area of concern for business, and from what the Minister says, I do not feel that he has reflected on the frustrations felt by businesses about what exists out there. I appreciate that the drafting of the new clause may not be perfect, and I will withdraw it on the basis that I may return to it at a later stage. I therefore beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 6

Employment tribunals: commencement
In the Employment Tribunals Act 1996 (c. 17) in section 6 (conduct of hearings), after subsection (2) there is inserted
(3) A person may only appear before an employment tribunal where their claim to the employment tribunal has been made within 3 months of the alleged incident which gave rise to the claim..[Mr. Djanogly.]

Brought up, and read the First time.

Jonathan Djanogly: I beg to move, That the clause be read a Second time.
I shall be brief, as I have already used a lot of the evidence in support of the new clause when speaking to the earlier new clauses. I want to add some certainty to employment proceedings that I have been led to believe does not currently exist. The employment tribunal service covers 21 different jurisdictions, ranging from unfair dismissal, of which there were 44,491 cases last year, to cases of discrimination on the grounds of sexual orientation. In many of those different areas, the various time limits for bringing claims vary, and what I propose under the new clause is that the time limit is standardised when such claims are dealt with by employment tribunals. I suggest that it should be three monthsthe time limit that is attached to unfair dismissal.
The new clause would have two benefits. On the one hand, companies could accurately predict at what point likely proceedings would be brought against them; while on the other hand, the employment tribunal process would be unburdened of those cases that have become a dim memory for those giving evidence, thereby ensuring that evidence is clear, concise and factually relevant. The provision would also tie in well with the tribunal procedural parts of the Bill, as people will have less excuse to not know where they stand at any point in the process.

John Hemming: There would be a bit of difficulty with the new clause. If it would bring in resolution processes after the incident but prevent someone from going to an employment tribunal, I oppose it.

Patrick McFadden: The new clause would make the time limit for bringing an employment tribunal three months from the date of the alleged incident. The matter was dealt with in the Governments consultation paper, which was published in March 2007, alongside the report of Michael Gibbons on dispute resolution. Under the current system, the mandatory time limits for bringing claims are either three months or six months, depending on the jurisdiction of the claim. The six-month limit applies principally in statutory redundancy payments and equal pay claims. Almost all time limits for claims can be extended at the discretion of the tribunal under certain circumstances. The position is complicated by the extensions to time limits that are allowed to give parties time to follow statutory procedures, but we are legislating to remove the statutory procedures, so the extensions will fall away with the removal of those under the Bill.
The Government consulted on whether time limits should be harmonised. Many people consider that harmonisation is a good idea; but as members of the Committee can imagine, when we asked whether the time limit should be three months or six months, there were divergent views. Some people argued strongly for three months, while others argued strongly for six months. Proponents of a three-month limit tended to argue that it was a long enough period to consider bringing a case and that justice would be better served when claims were made promptly, while proponents of a six- month limit argued that a three-month time limit would force potential claimants to submit claims before internal procedures had been exhausted. We have talked about the value of settling disputes before going down the tribunal route. Those who are perhaps preoccupied with dealing with the consequences of an incident or who are seeking a new job if the issue involved being sacked during pregnancy and whose baby was born subsequently might not have enough time to bring a claim within that period.
The current system has different time limits, which are reasonably well known in the system. They have been in place for some time, and the likelihood of needing to take more time to decide to make a claim in certain jurisdictions is recognised. We have consulted overall, and we have considered the matter. Agreeing that uniformity would be good is the easy part. Agreeing quite what form that uniformity should take is more difficult. We concluded that we would leave the system as it was with regard to the different jurisdictions and time limits. On that basis, we cannot agree to the new clause.

Jonathan Djanogly: The Minister has agreed that uniformity would be good. The problem is therefore what should be the uniform length of time. I will go away and think about what he has said and may come back to this issue at a later date. On that basis, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Question proposed, That the Chairman do report the Bill, as amended, to the House.

Jonathan Djanogly: May I thank you, Mr. Caton, and Mr. Bercow for your chairmanship of the Committee? The proceedings happened speedily and were well chaired. We got through all the business, having given due thought to everything. It has been a pleasure to serve with the Minister again. I also thank the Clerks, the police, the doorkeepers and everyone who has made the Committee happen so smoothly.

Patrick McFadden: I echo the thanks to you, Mr. Caton, and Mr. Bercow for guiding our proceedings so effectively. I thank the hon. Member for Huntingdon for the spirit in which he has conducted the debates and moved his amendments. Equally, the hon. Member for Solihull, who is not with us today, has been part of this regular DBERR team across the parties, if we can call it that. The same goes for the hon. Member for Birmingham, Yardley. I also thank all my hon. Friends for their contributions, particularly my hon. Friend the Member for Watford for her able assistance and my hon. Friend the Member for Plymouth, Devonport. The Bill was extensively discussed in the other place. As ever, those discussions added value to the parliamentary process that has eased our proceedings. With that, I thank members of the Committee once again for their help in these proceedings.

John Hemming: I echo the thanks to all who have watched these proceedings, as well as yourself, Mr. Caton, and Mr. Bercow. I thank the Minister, the hon. Member for Huntingdon and my hon. Friend the Member for Solihull, who is not present. The Bill started in the other House, where clearly a lot of the issues were resolved, thus enabling us to finish with seven minutes to spare in the first week. That is good going.

Martin Caton: Before I put the question, I thank the Committee for the good-natured way in which it has conducted itself in the main. I give special thanks to the Clerk for her hard work.

Question put and agreed to.

Bill, as amended, to be reported.

Committee rose at six minutes to Four oclock.